Filed under: Launches, India, China, Indices, Bank of America (BAC), Washington Mutual (WM), Toll Brothers (TOL), Oil, S and P 500, DJIA, Bear Stearns Cos (BSC), Housing

Thornburg Mortgage Inc. (NYSE: TMA) Chief Executive Larry Goldstone said there is a “crisis of confidence” in the mortgage market.

No kidding.

Shares of Thornburg fell about 9% after Goldstone made that insightful comment on CNBC. They are down 45% for the year amid concerns about the subprime mortgage meltdown. Thornburg sold about $20.5 billion in mortgage-backed securities today to return to “business as usual” — whatever that means.

Worries about subprime mortgages continued to weigh-down the market, as did the drop-off in oil prices caused by weather forecasts that indicated Hurricane Dean wouldn’t hit the oil-producing areas of the Gulf of Mexico. The Dow Jones industrial average and the Nasdaq Composite Index managed to hang onto positive territory for now as investors continued to hope — make that pray — that Fed Chairman Ben Bernanke will eventually cut interest rates.

Continue reading Thornburg (TMA) CEO sees ‘crisis of confidence’

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Filed under: Industry, Citigroup Inc. (C), JPMorgan Chase (JPM), Bargain stocks, Lehman Br Holdings (LEH), Housing

Over the weekend, Barron’s provided an excellent list of financial stocks that have been directly affected by the mortgage market blow-up and the downturn in the private equity business.

Names included MGIC Investment Corporation (NYSE: MTG), Countrywide Financial Corporation (NYSE: CFC), JP Morgan Chase & Co (NYSE: JPM) and Lehman Brothers Holdings Inc (NYSE: LEH), to list a few. Beware of bottom fishing too quickly. As Newton’s third law of motion says, for every action there is an equal and opposite reaction. With the housing bubble lasting three to four years, do not expect the housing and mortgage stocks to have sustainable rallies. It will take a number of years for the market excesses to balance out.

However, financial institutions that have exposure to the private equity market might be worth looking at and are in a better financial position to handle the excesses. Citigroup Inc. (NYSE: C) and JP Morgan stand out. Although it will take four to six months to work through the massive excess inventory these companies have committed to finance, these committed loans are not at risk of driving these two financial institutions out of business. Conversely, in the mortgage business, there are still plenty of companies that could go belly up.

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Filed under: Bad news, Options, Technical Analysis, Bear Stearns Cos (BSC), Housing

Bear Stearns Companies Inc. (NYSE: BSC) opened at $118.51. So far today the stock has hit a low of $114.49 and a high of $118.80. As of 10:50, BSC is trading at $115.17, down $3.03 (-2.6%).

After hitting a one-year high of $172.61 in January, the stock has fallen dramatically over the past few months, finally rebounding off support in the low $100’s earlier this month. The stock jumped late last week after the Fed’s rate cut, but with little on the news front today, BSC is retreating slightly as excitement wears off and investors remain cautious about the state of the financial sector. Technical indicators for BSC are bearish and steady, while S&P gives the stock a very negative 1 STARS (out of 5) sell rating.

For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $140 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk and leverage returns. For this particular trade, we will make a 6.3% return in just 5 weeks as long as BSC is below $140 at September expiration. BSC would have to rise by 21% before we would start to lose money.

BSC has not been above $140 in the past month and has basically been in a free-fall over that time period, with some resistance around $121. This trade could be risky if the mortgage issues clear up, but that seems unlikely in only one month.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Brent neither owns nor controls positions in BSC.

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Filed under: Competitive strategy, AT and T (T), Sprint Nextel Corp (S), Verizon Communications (VZ)

Although Sprint Nextel Corp. (NYSE: S) CEO Gary Forsee downplayed the impact of the Apple, Inc. (NASDAQ: AAPL) iPhone during the recent release of the company’s latest quarterly results, he’s shifted his wording a bit now and says that competition from the all-in-one device, along with general economic conditions, could hamper the ability of Sprint to gain new customers in the near future.

Although Sprint is selling wireless handsets like the Samsung UpStage and the LG Muziq to complete with the iPhone, neither sync with Apple’s iTunes software — which is a biggie. Although Sprint has over 100,000 downloadable songs priced at an Apple-esque $0.99 and can beam these purchases right to handsets over the air (no PC required), the iPod/iPhone/iTunes ecosystem Apple has built is one formidable competitor.

While adding only 16,000 post-paid customers in its most recent quarter — as compared to the millions added by the competition — Sprint management is probably feeling the heat from investors. How is it going to grow and what is the strategy being undertaken? Forsee stated that “We know we have to produce in order to have investor confidence in the future . . . that’s certainly what we intend to do as a company and what I intend to do as chief executive.” He has probably two or three more quarters to prove those words beyond a shadow of a doubt or he could be gone. Although Sprint provides fine services, competing with larger rivals AT&T, Inc. (NYSE: T) and Verizon Communications, Inc. (NYSE: VZ) is proving harder each quarter that goes by.

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Filed under: Newspapers, Scandals, Housing

Imagine this: you lose your home to foreclosure, like so many other Americans are right now. Then the IRS comes and tell you that you owe a third of the mortgage’s value in back taxes.

According to The New York Times, homeowners whose lenders forgive a loan after the house is sold for less than the value of the mortgage are liable for income tax on the amount forgiven — because it’s sort of like a gift or something. What?

As foreclosure rates soar — experts believes 20% of the subprime loans made 2006 will end up in foreclosure — thousands of Americans will find themselves out of their homes, broke, and owing tens of thousands to the IRS.

Meanwhile, the private equity industry is lobbying against efforts that would require them to pay ordinary income taxes.

If KKR doesn’t have to pay ordinary income taxes on the billions it makes, should people who lose their homes have to pay for the amount that is forgiven?

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Filed under: Earnings reports, Live coverage, Target Corp. (TGT)

Where is Target Corp. (NYSE: TGT) going tomorrow when it releases Q2 numbers at 9:30 am CST? The company has done very well with recent monthly same-store sales numbers and continues to steal the spotlight from larger rival Wal-Mart Stores, Inc. (NYSE: WMT). Six years ago, it looked like nothing could cast a cloud over Wal-Mart. Every month now that seems to happen, although Wal-Mart is still by far the largest retailer operating today.

Target Corp. (NYSE: TGT) will lay it on the line tomorrow and the conference will be carried here in a liveblog at BloggingStocks, so don’t forget to check back tomorrow morning for minute-by-minute coverage. The second-largest discount retailer in the U.S. is expected to report an earnings per share figure of about $0.80 with a quarterly revenue figure of $14.7 billion. Target’s in-house credit card business is usually a highlight in its numbers, so we’ll see if that continued in this last quarter as credit crunches happened in the housing market and gas prices were up (though not wildly fluctuating).

Also in the quarter just ended there should be some effect from the second-largest shopping season for many retailers — back to school. Did Target see a lift from sales in late July due to this? Did parents wait until mid-August to line up those pencils and folders? This is sure to be discussed as well as how Target is managing to poke holes in Wal-Mart’s huge balloon every quarter. In terms of overall shopping experience, Target has a long lead over almost any Wal-Mart Supercenter or regular store, from what I have seen recently. Let’s see if that translated into another great quarter tomorrow morning.

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Filed under: International markets, Newsletters, Canada, Japan, Eastern Europe

For those looking to diversify their portfolios to include foreign currencies — as a hedge against U.S. dollar weakness — global expert Nick Vardy points to an intriging exchange-traded fund: Powershares DB G10 Currency Harvest Fund (ASE: DBV).

In his Global Bull Market Alert, he explains, “This ETF will not only to protect our capital, but also to generate steady returns over the course of the remainder of this year.

The advisor points out, “For all of the attention focused on the world’s stock markets, total trading volume in the world’s currencies, including derivatives and futures, averages around $2.9 trillion a day, about 10 times the combined daily turnover on all of the world’s equity markets.”

He continues, “The best way to play the currency game is through the DB G10 Currency Harvest Fund, a low-cost currency hedge ETF with a proven technical trading strategy.”

Continue reading G10 Harvest (DBV): Currency diversification via ETF

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Filed under: Before the bell, Analyst reports, Dell (DELL), Analyst initiations, Stocks to Buy, Stocks to Sell

MOST NOTEWORTHY: Ocean Power Tech (OPTT), Dell (DELL) and VMware (VMW) were today’s noteworthy initiations:

• B. Riley initiated Ocean Power Tech (NASDAQ: OPTT) with a Buy rating, citing valuation.

• WR Hambrecht believes Dell’s (NASDAQ: DELL) renewed focus on the consumer will help the company gain back share, starting shares with a Buy rating.

• Cowen initiated VMware (NYSE: VMW) with a Neutral based on valuation…

OTHER INITIATIONS:

• UBS started West Pharmaceutical Services (NYSE: WST) with a Neutral rating.

• BMO Capital started Scientific Learning (NASDAQ: SCIL) with an Outperform.

• Equitable Resources (NYSE: EQT) was initiated with a Buy rating at Deutsche Bank.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

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Filed under: Before the bell, Analyst reports, Analyst upgrades and downgrades, Bad news, Countrywide Financial (CFC), McGraw-Hill Companies (MHP), USG Corp (USG), Stocks to Sell

MOST NOTEWORTHY: McGraw-Hill (MHP), Stein Mart (SMRT), USG Corp (USG) and Seacoast Banking (SBCF) were today’s noteworthy downgrades:

• JP Morgan downgraded shares of McGraw-Hill (NYSE: MHP) to Neutral from Overweight based on expectations for a decline in credit market issuance activity.

• Stein Mart (NASDAQ: SMRT) was cut to Sell from Neutral at Merrill, citing macroeconomic concerns and the impact on margins and comps.

• Matrix cut USG (NYSE: USG) to Sell from Buy and removed them from the Focus List, Matrix cited the 55% cut in excess cash per share over the past year, which makes shares expensive on a performance-adjusted basis.

• Stifel views Seacoast Banking (NASDAQ: SBCF) as overvalued, downgrading shares to Sell from Hold, given earnings growth headwinds from credit quality and net interest margin compression…

OTHER DOWNGRADES:

• Tenneco Automotive (NYSE: TEN) was downgraded to Neutral from Buy at Goldman.

• Brookdale Senior Living (NYSE: BKD) was downgraded to Hold from Buy at Stifel.

• Keefe Bruyette cut Countrywide Financial (NYSE: CFC) to Underperform from Market Perform.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

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Filed under: Before the bell, Analyst reports, Analyst upgrades and downgrades, Good news, Anheuser-Busch Cos (BUD), CBS Corp ‘B’ (CBS), Darden Restaurants (DRI), Hunt(J.B.) Transport (JBHT), Stocks to Buy

MOST NOTEWORTHY: J.B. Hunt Transport (JBHT), Gold Fields (GFI), Anheuser-Busch (BUD), CBS Corp (CBS) and Amerigroup (AGP) were today’s noteworthy upgrades:

• Wachovia upgraded shares of J.B. Hunt Transport (NASDAQ: JBHT) to Outperform from Market Perform citing strength in the company’s Intermodal franchise.

• Matrix USA upgraded Gold Fields (NYSE: GFI) to Buy from Sell, citing the strong demand for gold jewelry from affluent customers in developing markets and investors.

• AG Edwards upgraded Anheuser-Busch (NYSE: BUD) to Buy from Hold based on valuation and improving fundamentals.

• CBS Corp (NYSE: CBS) was upgraded to Buy from Neutral at SMH Capital based on expectations for CBS to continue to increase its annual dividend 10% a year.

• Jefferies is more confident in Amerigroup’s (NYSE: AGP) ability to see further medical cost improvements in its GA market and it its TN expansion, upgrading shares to Buy from Hold…

OTHER UPGRADES:

• Goldman upgraded Micron Tech (NYSE: MU) and Novellus Systems (NVLS) to Neutral from Sell.

• CIBC raised Darden Restaurants (NYSE: DRI) to Sector Outperformer from Sector Performer.

• BMO Capital upgraded National City (NYSE: NCC) to Market Perform from Underperform.

• Needham raised OmniVision Tech (NASDAQ: OVTI) to Buy from Hold.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

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